Fundamental breach of contract means a violation of cornerstone features of a contract. That should be thorougly reviewed by particularly companies about their business relations.
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Introduction
There is no doubt that one of the core principles of Contract Law is that the parties are obliged to perform their mutual obligations within the framework of foreseeability and good faith. This obligation ensures the reliability of the contract and the stability of the legal relationship between the parties.
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Especially in contracts that impose mutual obligations, it is critically important to clearly and precisely define both the order of performance and the respective obligations, in order to prevent any loss of rights. Drafting contract provisions in a clear, explicit, and foreseeable manner helps avoid potential disputes and contributes to the effective implementation of the contract. This article will present our recent experiences on fundamental breach of contract through such an important international case about the fundamental breach of contract.
What is meant by Contract Law?
Contract law in Turkey is a legal framework that governs the creation, execution, and enforcement of contracts between parties. This area of law is primarily based on the Turkish Code of Obligations, which outlines the requirements for a valid contract, such as the capacity of the parties, mutual consent, lawful purpose, and clear terms. Contracts can be written, oral, or implied, but they must meet these basic criteria to be enforceable under Turkish law.
Case Analysis on Fundamental Breach of Contract
Pi Legal Consultancy has offered an embracing legal guidance and representation services to one of landmark international companies located abroad. The present case demonstrates the seriousness of potential legal consequences due to the violation of contract articles between parties. It necessarily means that contracts between cross-border parties must be drafted very carefully and properly.
In the case at hand, an Agreement was signed between the parties for the development of a software programme explicitly providing that the developer’s obligation to deliver the project is a precondition for the payment obligation to arise. Despite the fact that the developer party failed to fulfill any of its delivery obligations for the certain software programme, the receiver party (the Client) sent monthly payments based solely on mutual trust. Seeking to secure itself against potential shortfalls in monthly payments, the developer party notified the receiver party (the Client) that it would withhold delivery unless all invoices were paid in full in advance.
Legal Characterization of the Breach: Fundamental Breach of Contract and Frustration of Purpose
Non-fulfillment of the developer party\’s obligation for the provision of an opportunity to use the relevant programme has a detrimantal impact the implementation of full contract. Such approach is a clear example of fundamental breach of contract and contradicts the fundamental principles of contractual performance order. Indeed, although there were deficiencies and delays in the monthly payments, the contract granted the developer the right to suspend their works in the event of partial or delayed payments. However, the developer did not exercise this right and continued to work on the project, yet deliberately refused to deliver the product. There is no contractual provision that would legally justify such conduct.
In addition, failure to comply with the agreed project timeline rendered the fundamental purpose of the contract ineffective and nullified its legal cause. In fact, the delay in delivery led to the withdrawal of financial support by third parties funding the project, directly causing losses to our client. Under these circumstances, no mutual intention or reasonable benefit remained to justify the continuation of the contractual relationship.
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Conclusion
This specific case clearly demonstrates the potentially severe legal and financial consequences of breaches in contracts that impose mutual obligations. In the present matter, despite the client’s delay in payments which, in principle, granted the other party the right to suspend the work, the contractor acted in violation of the contractual provisions by refusing to deliver the work. As explicitly stipulated in the agreement, this conduct entitled our client to both terminate the contract and seek compensation for the damages incurred.
It must be remembered that rights can only be protected to the extent that they are contractually defined. Therefore, contracts must be drafted with care, precision, and in a comprehensive manner to enable the non-breaching party to pursue legal remedies such as termination for cause, restitution of payments, compensation for damages, or interim injunctions. Ensuring that this process is properly managed and that contracts are structured soundly from both legal and technical perspectives requires the guidance of a qualified attorney. Legal support from Contract Law Attorneys are essential to fully protect the parties’ interests and to help prevent future disputes. In the case of fundamental breach of contract, legal proceedings should be very carefully followed up by parties.
Büşra Dereli
Attorney at Law
